A reminder: our membership promotion has 36 hours left to run. Save over 50% on an annual membership that protects you against future price increases for the life of the site.  It works out to about $3/day, not a bad price for some pretty terrific results. To sign up, CLICK HERE.

For those who’ve recently joined as monthly, quarterly or semi-annual members, consider upgrading to an annual membership now.  Annual rates will revert to $1,650 when this promotion is over, and are slated to increase to $1,800 next month. 

And, don’t forget, referring a new annual member will earn you (or, share it with them) a cool $300.  Or join with a friend and split it.  Either way, it’s my way of saying thanks for sharing the word.

*  *  *  *  *

For the last month or so, we’ve been tracking USDJPY’s movement through (and beyond) the Pennant Pattern that set up following the Aug 24 plunge.  Yesterday, USDJPY confirmed its importance by racing to the top of the Pennant and sitting there for the next 4 hours.  SPX dutifully followed along, logging in its second biggest day since last week’s bottom as traders anticipated a big breakout.

But, they were disappointed. There was no breakout. SPX reached the highest of our three targets yesterday, but USDJPY — not so much.  So, we’re sitting here this morning at pretty much the same spot that we left off yesterday.  And, the only chart that really matters today is this one:It’s the schedule of BoJ’s Monetary Policy Meetings.  If Kuroda, who is supposed to speak at 11pm, announces more easing, then the Pennant breaks out and the carry trade can go on to produce new highs.  If he doesn’t, then it’s back to the bottom — or lower — for more cellar dwelling, at least until the next meeting at the end of the month.

continued for members…

USDJPY’s action yesterday and overnight, while hinting at a breakout, didn’t deliver.

I did a lot of charting over the weekend, but have hesitated to post them only because almost everything out there is positioned in the same binary fashion — a bullish rebound and/or new highs if they ease further, a bearish leg to new lows if they don’t.

My gut, and our new analog, tell me that they won’t ease until the end of the month.  The Fed’s meeting is set for the 27th, and the BoJ’s meeting on the 30th is no doubt viewed as a backstop to whatever nonsense comes out of Eccles.

And, I think the fact that the TPP is silent on the very currency provisions on which Congress insisted precludes the BoJ from making any moves just yet.

But, I’m not confident enough on the timing that I’d go out and make a big bet on it in the near term.

UPDATE:  9:50 AM

What little strength we’re seeing in SPX so far (2 points) is coming from the CL algos.  Note, however, that while CL exceeded last week’s highs, it just completed a Bat Pattern at the white .886.  Of course, it also completed a IH&S Pattern.

So, I’ll be watching closely to see what develops.UPDATE:  10:35 AM

SPX is selling off, but CL’s continued strength is keeping the losses manageable.  Look for it to catch support from the 5-min SMA100, with the 1975-1978 range still likely.UPDATE:  11:40 AM

SPX just about to our first target, which could be shanghaied by the white .707.  I’d be prepared to take profits here if it bounces prematurely. I much prefer the yellow target at 1963.96 with the SMA200 cross in an hour or so, but that’s up to USDJPY, which almost reached the 120.11 Fib a moment ago.  Can it dip a little lower?UPDATE:  11:57 AM

There’s 10 points more downside potential to the yellow target at 1964.  But, I’d want to see USDJPY dip below 120.11 before getting excited about extending this short.

If it bounces here, the bounce could be cut short by the falling SMA10,20,200 at 1980-81.  So, I’d let it bounce and see how it reacts there before jumping in on the long side.

UPDATE: 12:22 PM

Wouldn’t be surprised if SPX found a way to go sideways for the rest of the day — as USDJPY is doing.  I imagine just about everything between now and Kuroda’s comments will only serve to whip stocks back and forth — with no real direction. Under such circumstances, I think it best to stay on the sidelines — and, should USDJPY dip below 120.11, I’d wait half a beat just to make sure it’s not a head fake.If USDJPY does dip below 120.11, and SPX has dipped below 1975, then I’d want to be short for 1963.96 with relatively tight trailing stops.  I suspect this will happen.

UPDATE:  12:34 PM

SPX is breaking down below the channel line, but no USDJPY confirmation yet.  I’d hold off.  There’s the possibility that CL, which tagged the red .886 earlier and supported stocks this morning, will lead the way lower.  I’d consider that, but only as a short-term trade with tight stops.  It wouldn’t mean a thing if USDJPY suddenly spikes higher. Looking for SPX to backtest the SMA20 and make a move.

UPDATE:  1:05 PM

SPX has backtested the SMA20 and USDJPY the .618.  This would be a logical place for a downturn for anyone itching to make a few bucks.  Just keep your stops close, because USDJPY hasn’t definitely not confirmed it.I think there’s just as good a chance that SPX runs up and tags the SMA100/50 combo at 1981.53, so I’d prefer to sit on the sidelines unless USDJPY starts tanking.

UPDATE:  1:27 PM

SPX has leapt up out of the falling channel to test the SMA50/100 at 1982, while USDJPY has maybe made a reversal at the SMA100 (the SMA200 is more commonly the reversal point.)

There’s a good chance that SPX will only drop to the SMA10 — currently at 1977.78 and continue higher as USDJPY tags the SMA200.  In other words, I’m not sure the upside potential is there.If SPX can push below the rising SMA10 and USDJPY is tanking, then I’d definitely reconsider.   With the 1963.96 target, there’s still plenty of room to score 10+ points.

Here’s the problem with taking a stance here.  NKD, which is arguably closer to the action in Tokyo, has backtested a rising channel midline on the high side of the falling channel midline.  While the 60-min has hit resistance at the SMA10/20, it has the support of the SMA50.  In other words, it could break either way — but the presumption is to the upside.

Now, I don’t happen to believe that presumption will play out.  But, I can’t ignore it.  And, since SPX has seen fit to break out of the most obvious falling channel, I have to respect the possibility that we’ll get more upside before downside — or at least that the next leg down won’t come until late in the day.

UPDATE:  2:15 PM

Potential turning point here at the SMA200 as USDJPY just tagged its (and, the .618.)

UPDATE:  2:41 PM

SPX finally reached the .618, as USDJPY did a while ago.  If USDJPY can start falling below the SMA10/20, then there’s potential for our lower targets — though probably 1969.32 instead of 1963.96 at this point.  Otherwise, it’ll keep going sideways until the close.

UPDATE:  2:56 PM

One more shot at a short position here at 1979.50.  Target is 1969.32.  tight stops recommended.

And, keep an eye on VIX — perhaps breaking out here?  Has a gap to fill…

CL testing earlier highs, trying to keep SPX on the rise.UPDATE:  3:26 PM

SPX is trying to work its way lower, but CL keeps ticking higher every time — even making a new high a moment ago.  Ditching the short at 1980.58.

Seems pretty clear to me that there’s plenty of selling pressure here.  But, the algos/CBs won’t allow it.  Probably want to get fully short first, in which case it’ll probably gap down in the morning.  Short overnight if you can hedge.  Otherwise, probably done for the day.

UPDATE:  3:38 PM

If USDJPY could dip below the TL, SPX has a shot at 1969.  But, it’d happen all of a sudden, and be over with quickly.  Shorting here for overnight hedgers only.